Investment banks expect that the Central Bank of Egypt, during its fifth meeting of 2023 next Thursday, will tend to keep interest rates unchanged, due to the lack of abundant liquidity of hard currency in the country.
6 investment banks expected the Central Bank to keep interest rates as they are, while Beltone expected the Central Bank to raise interest rates by 100 basis points.
The investment banks that participated are: EFG Holding, Beltone Financial, Naeem Financial, CI Capital, Prime Holding, Zilla Capital, and Al Ahly Pharos.
The Central Bank of Egypt kept the interest rate at 18.25% at the June meeting, after it raised it last March by 200 basis points for the first time during the current year, and by 800 basis points last year, in an effort to absorb the wave of inflation, and in order to attract foreign investments in hard currency into tools. Government debt, after about $22 billion left the market following the Russian-Ukrainian crisis.
The real interest rate in Egypt (the nominal interest rate minus the inflation rate) is negative 17.45%, according to the latest data.
Aya Zuhair, head of research at Zila Capital, believes that the Central Bank of Egypt may move towards keeping interest rates as they are at the next meeting.. The problem we have now is saving the dollar and not facing inflation.
Inflation in Egypt's cities jumped, on an annual basis, during last June to 35.7% from 32.7% in May, under pressure from the government's hike in diesel prices, the scarcity of hard currency needed for imports, and the return of goods to the ports.
Radwa Al-Swaify, head of research at Al-Ahly Pharos, agrees with Zuhair that the Central Bank resorted to keeping interest rates unchanged next Thursday, because - as she said - he took a proactive step in light of the proactive interest rate increases that took place in March 2023 and December 2022 by about 500 points. Basically, any hike in interest rates in Egypt will be linked to the movement in the official exchange rate, which is not expected to happen before the last quarter of 2023.
The Egyptian currency trades in the official market at 30.95 pounds per dollar, while it ranged in the parallel market trading during the last two weeks at about 38-39 pounds per dollar.
The interest paid in advance is a haven for Egyptian banks to save their share of the deposit cake
El-Swaify indicated that public banks resorting to issuing new dollar certificates is a step to increase foreign currency resources within the banking system, in order to avoid the need to raise interest rates on the Egyptian pound.
In order to provide dollar liquidity, Egypt has worked during the last period to sell some of its assets to investors, and succeeded in raising up to 1.9 billion dollars, and it hopes to collect another billion dollars from selling new assets during the next few period, according to the statements of Prime Minister Mostafa Madbouly.
Muhammad Abu Basha, chief economist at EFG Holding, considered that there are no major changes, whether in the level of inflation or otherwise, that push the Central Bank to raise interest rates.
